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Cox Communications tying class action goes to the jury

After a near two-week trial in the consumer class action lawsuit against Cox Communications, the jury began deliberations this past Monday to decide whether Cox’s alleged practice of tying premium cable services to rentals of its cable boxes violated the Sherman Act by harming competition in the set-top box market. As we previously reported, Cox’s premium services subscribers were not contractually obligated to rent set-top boxes but were required to do so by Cox’s internal policies in order to receive the premium services for which they paid. The premium services at issue, also referred to as “two-way services,” include interactive content like video-on-demand, program guides, pay-per-view, and parental controls.

Although the court noted in its summary judgment order that a material factual dispute existed over whether Cox made efforts to allow its customers access to premium cable services through set-top boxes not manufactured exclusively for use with Cox cable, Cox did not present particularly strong evidence of any attempts to develop such an alternative. For instance, Cox wrote to the Federal Communications Commission in 2010 stating it had reached an agreement with TiVo Inc. to allow Cox subscribers to use TiVo boxes, but the deal did not go into effect until five years later. Cox effectively conceded that its consumers did not have an alternative to renting its set-top box but argued that Cox was not to blame for the lack of alternatives in the market. Rather, Cox claimed that box manufacturers, including the manufacturer of its own boxes, elected not to sell set-top boxes at retail and failed to develop a uniformly compatible alternative. Cox further argued to the jury that Cox’s alleged high-level decision to block set-top boxes purchased on eBay was merely to prevent the use of possible stolen boxes rather than evidence of an illegal tying arrangement as the plaintiffs contended.

The plaintiffs pointed to Cox’s economic power in the relevant geographic market, which the court defined as Cox’s Oklahoma City subsystem, where its market power averaged 65.3% from 2005 to 2012. The plaintiffs argued that they proved that Cox tried to impede competition in the market and “destroyed any realistic market alternatives” by delaying the TiVo deal five years and blocking eBay-bought boxes. As a result, the plaintiffs argued that nearly 500,000 people were overcharged for Cox’s premium services. The plaintiffs are seeking nearly $49 million in damages, and any damages awarded will be trebled by the court.

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